Throughput Accounting Calc 2

Performance Information that enables you to

MAXIMIZE THE PROFIT MIX

THROUGHPUT ACCOUNTING SIMULATOR




	HOW TO USE THE SIMULATOR You need to use this information. It is the minimum information to make this example true to real life yet simple enough for anyone to follow. When ready, click the 'PART' buttons below.

PART 2 of 3

has many customers who buy a mix of products that SmoothGlide makes. There are two products sold, Rainbow rods and Forest rods. To make these curtain rods, SmoothGlide has invested in two machines: Blue and Green. Rainbow rods and Forest rods sell for $100.00 and $90.00 respectively. Totally Variable Costs (TVC), comprising material and packing costs, are $40.00 and $30.00 for Rainbow and Forest respectively.

It is now Friday evening at the close of the weeks business. SmoothGlide works a five day week and is a make-to-order business and has a problem because at the close of business this evening, it already had orders for 100 Rainbows and 100 Forests that have to be delivered and sold by the end of next week and there is no finished goods inventory. Your are the new CEO and this is your first day at SmoothGlide and you must help your management decide what to do next week so that customers are not lost but satisfied as much as possible whilst SmoothGlide's profits are maximized.

Here is the additional information you requested: Production time for a Rainbow rod is 15 minutes on the Blue Machine Blue and 10 minutes on the Green Machine. A Forest rod takes 12 minutes on the Blue Machine and 12 minutes on the Green Machine. Setup times are 60 minutes on the Blue Machine and 30 minutes on the Green Machine. Two setups are needed every week. Operating Expenses per week are $9500.00 and include rent for 1000 square feet as well as salaries and wages and all other operating expenses except for the TVC. Normal working hours are one shift of 8 hours. Raw materials are received and paid immediately as required for production. To keep things simple the manufacturing batch size and the transfer batch size is equal to the maximum capacity and only the two setups per machine are required for the whole week.

Can you satisfy the customer's orders and make a profit? What will you do first? How much profit you can make for SmoothGlide's shareholders?

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